Shoplifting, Theft, Fraud Cost Retailers Billions
Retailers lose billions of dollars each year as a result of shoplifting, employee and vendor theft and administrative error, which is known as inventory shrink, according to a new study.
The study was conducted by by NRF PROTECT, the industry's largest retail loss prevention event in North America. According to the National Retail Federation/University of Florida National Retail Security Survey, retailers say inventory shrink averaged 1.38 percent of retail sales, or $44 billion, in 2014, the lowest percentage in the survey's 24 year history. But, for the first time in a decade, there has been an increase in the cost per shopping incident, more than $318.
According to the survey, retailers estimate that shoplifting accounted for the largest part of the reported shrink in 2014, 38 percent, followed by employment theft at 34.5 percent, administrative and paperwork errors at 16.5 percent, vender fraud or error, 6.8 percent, and unknown loss.
"Retail loss prevention professionals have one of the hardest jobs in the industry protecting their customers, employees and merchandise from the threat of harm and fraud, and the results of this survey prove the enormity of their task," said Matthew Shay, NRF president and CEO in a press release Wednesday. "Retailers will continue to network with each other and educate decision makers in Washington about the burdens these crimes place on consumers, retail companies, their employees and the economy."
"A common misconception about shoplifting is that retailers can afford the loss of a candy bar or a pair of jeans, but the truth is that the industry loses billions of dollars each year at the hands of callous criminals that could be put towards human capital, promotions and other necessary business operations," said NRF Vice President of Loss Prevention Bob Moraca. "Though we are encouraged by the partnerships forged with law enforcement over the years and advances in technology that will help deter a crime before it happens, criminals continue to thwart much of the progress retailers have made thus far."
When it comes to loss prevention budgets, 39.4 percent of those surveyed said their budget for 2015 increased over 2014, 36.6 percent said their budgets would be similar to what they were last year and 23.9 percent decreased their resources. Retailers are taking action to try and prevent theft with better training of sales associates, the installation of electronic surveillance devices and article surveillance, which are special tags that are placed on merchandise.
Criminology professor at the University of Florida and lead author of the survey for the past 24 years, Dr. Richard Hollinger, said this year's shrink percentage is the lowest seen in the survey's history.
"Loss prevention professionals have done a commendable job of elevating the issue of shrink and retail fraud within their own companies and with industry insiders and the public, but the battle wages on to find ways to contain further losses to their businesses," he said. "As retail issues like shrink and security become more complex, retailers should continue to work together as an industry to ensure continued partnerships, with the end goal of finding the most effective asset protection solutions possible."